Study: Nursing Homes Take Big Bite Of Household Income

August 11, 1985|By Washington Post

WASHINGTON — When a household headed by an elderly person supports someone in a nursing home, the cost averages about $20,500 a year and about half of that comes directly from the household's private funds, says a study released recently by the American Association of Retired Persons.

The study, conducted by David Kennell of ICF Inc., a consulting firm on health and other public-policy issues, suggests that the biggest gap in health-care coverage for the aged is protection against the high costs of longterm nursing-home care.

The study says health spending in 1986 for all elderly persons will total $150 billion, excluding insurance premiums. Medicare and other public programs plus private insurance will pay for most of this. But the elderly will pay $37.3 billion out of their own pockets. The biggest single chunk of this, $16 billion, will be for nursing-home care.

The next largest out-of-pocket item is $7.3 billion for prescription drugs and sundries.

The study shows that more than 90 percent of the cost of hospital care for the elderly is covered by government programs or insurance. Medicare alone covers 66.3 percent of hospital costs. More than 75 percent of the cost of doctor care comes from government programs or insurance. The remainder is paid out-of-pocket.

Robert Rubin, former assistant secretary of Health and Human Services who is executive vice president of ICF, said, ''Most people are unaware of the fact that they don't have coverage'' for longterm nursing-home care under either Medicare or private insurance policies. Only Medicaid pays for longterm nursing-home care, but the patient must be indigent to qualify for Medicaid.

The survey estimates that overall, the average elderly household in 1986 will have health expenditures, including insurance premiums, of $8,340. About $2,670 of this will come from the family. Medicare will cover about $3,300.

The average elderly household will pay about 11.6 percent of its gross income on direct payments and health insurance premiums. But the average masks substantial differences between various income and demographic groups, the study said.

For example, for those 85 and over, out-of-pocket expenditures and premiums represent 42 percent of income, reflecting that many of these people are in nursing homes with huge outlays. ICF estimated 1.6 million elderly in nursing homes in 1986, out of about 29 million persons 65 and over.

Low-income households, below $10,000 a year, are estimated to spend 56.6 percent of their income on out-of-pocket medical outlays and insurance premiums. For an elderly person of low income, nursing homes can eat up most of his or her income.

The higher the income, the lower the percent that goes for out-of-pocket medical costs. For example, households with income above $75,000 spend 2.2 percent on out-of-pocket medical costs and insurance.

One recent federal revenue-raising proposal is that the government should count as income to the elderly -- and thus becomes subject to income tax -- the part of the Medicare doctor-insurance program that is paid for by general revenues from the Treasury. Those revenues amount to about $576 a person.

The study found that if this were done it would barely increase -- from 11.6 percent to 11.9 percent -- the share of the income the elderly paid out- of-pocket. Low-income households pay little tax, so it would affect them little, if at all. It found that households with income at double the poverty line would average about $112 in extra taxes. The poverty line for an elderly family of two in 1986 was estimated at $7,000.